Management accounting

Arab Open UniversityB292: TMA–A
Summer Semester 2023-2024
Cut-Off Date: TBA
About TMA:
The TMA covers the management accounting concepts and practices in the businesses. It is marked
out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’
understanding of one of the important concepts in management accounting which has emerged as an
alternative to traditional costing methods. In recent years the nature of industrial production has
fundamentally altered as it became more capital intensive and based on machine production, overheads
tend to be more dominant and the international market became highly competitive. This TMA requires
you to apply the course concepts. The TMA learning objectives are intended to:
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Enhance student ability to understand the analysis of cost-volume-profit relationship.
To emphasize the importance of cash budgets to the company.
Assess students’ understanding of key learning points within units 2, 3 & 4.
Increase the students’ knowledge about the reality of the Managerial Accounting as a profession.
Develop students’ communication skills, such as memo writing, essay writing, analysis and
presentation of material.
Develop the ability to understand and interact with the nature of the managerial accounting tools
in reality.
The TMA requires you to:
1- Review various study sessions beside the supplementary materials.
2- Conduct a simple information search using the internet.
3- Present your findings in not more than 2,000 words ± 10%.
4- You should use a Microsoft Office Word/excel and Times New Roman Font of 12 points.
5- You should read and follow the instructions below carefully. Each part of the process will carry
marks for the assignment.
Criteria for Grade Distribution:
Content
Part A
Part B
Criteria
Case
Analysis
Marks
60
40
Structure
and
Referencing
Total
Presentation
(to deduct)
marks
of ideas
(to deduct)
(5)
(5)
100
B292 TMA (Summer 2023-2024)
Part A (60 Marks)
Question 1 (30 Marks)
Cost accounting is an accounting process that measures all of the costs
associated with production, including both fixed and variable costs. The purpose
of cost accounting is to assist management in decision-making processes that
optimize operations based on efficient cost management.
Required:
Identify and clearly explain 5 different types of costs that are used in managerial
decision making. In addition, provide a clear and relevant example for each of
these costs for Aston Martin car manufacturing company.
Question 2: (30 Marks)
A. Company Alpha is using a two-year-old machine costing $24,000. The
company uses straight-line depreciation, while the machine has a useful
life of 10 years.
Company A is considering buying another machine costing $45,000 with
a useful life of 9 years. The new machine won’t have any effect on the
number of units that a company produces. Company A, however, expects
the variable cost to come down from $34,000 to $22,000. Fixed costs will
also be the same at $20,000. Using the above information, determine
which are relevant and which are irrelevant and the cost implication for
the company. Provide a justification for your choice. (15 Marks)
B. The company also has a new project which requires the following three
types of labor.
Hours Required Additional Information
12,000
Paid at $8 per hour and existing staff are
fully utilized. The company will hire new
staff to meet this additional demand.
Semi-Skilled 2,000
Paid at $12 per hour. These employees are
difficult to recruit, and the company retains
a number of permanently employed staff,
even if there is no work to do. There is
currently 800 hours of idle time available,
and any additional hours would be fulfilled
by temporary staff that would be paid at
$14/hour.
B292 TMA (Summer 2023-2024)
Unskilled
Skilled
8,000
Paid at $15 per hour. There is a severe
shortage of employees with these skills and
the only way that this labor can be provided
for the new project would be for the company
to move employees away from making
Product X. A unit of Product X takes 4 hours
to make and makes a contribution of
$24/unit.
Required: What is the relevant cost of the labor hours required for the new
project? Students should analyze each type of labor involved and calculate the
total relevant cost. (15 Marks)
PART B (40 Marks)
O’Donovan Constructions is a company based in London actively involved in
the construction and refurbishment business. Assume that Michael, the owner,
tasks his team to make a comparison between two potential real estate
development projects. He also reminds them that the company’s financial
health is on the decline, so he must select one of them.
The team works through the parameters and lists below the potential income
and costs of each project.
Project 1
– 500 housing units will be constructed.
– 400 of them will be sold and 100 of them will be rented for 20 years.
– Rental Price of each unit is 4,000 USD per year
– Rented 100 units will be sold 70,000 USD after 20 years.
– Construction Cost of each unit is 100,000 USD.
– The sale price of each unit is 120,000 USD.
– The project needs a luxury sales office with a price of 2,000,000 USD.
– The sales personnel cost is 300,000 USD per year.
– The project duration is 3 years.
– Project financing cost is 3,000,000 USD per year
Project 2
– 400 housing units will be constructed.
– 350 of them will be sold and 50 of them will be rented for 15 years.
– Rented 50 units will be sold 80,000 USD after 15 years.
B292 TMA (Summer 2023-2024)
– Rental Price of each unit is 4,500 USD per year
– Construction Cost of each unit is 90,000 USD.
– The sale price of each unit is 135,000 USD.
– The project needs a luxury sales office with a price of 3,000,000 USD.
– The sales personnel cost is 250,000 USD per year.
– The project duration is 2 years.
– Project financing cost is 2,500,000 USD per year
Required:
Using the above available information by applying cost-benefit analysis, advise
the owner of O’Donovan Constructions company which of the two potential real
estate projects would be more beneficial. Students are required to perform the
necessary calculations and based upon this provide a discussion supporting
their decision on the chosen project.
END OF TMA
B292 TMA (Summer 2023-2024)